Application of a hybrid multi-criteria decision making approach for selecting of raw material supplier for Small and Medium Enterprises

Abstract

The selection of raw material supplier is a multifaceted issue relating multi-criteria under fuzzy environment. For Small and Medium Enterprises (SMEs), they do not have their own engaged suppliers and certainty budgets; therefore, it is quite difficult to find the optimal raw material suppliers on multi-periods. Recently, there has been extremely little research work in the area of vender selection based on time axis. However, there has not been any research study for considering about the problem of selecting of raw material supplier accordingly to time series for SMEs. To overcome this problem, Fuzzy Analytic Hierarchy Process (AHP) and Technique for Order Preference by Similarity to Ideal Solution (TOPSIS) methods are integrated in this paper, which is a novel approach for solving the problem of both qualitative and quantitative criteria of selecting raw material supplier. The Fuzzy AHP algorithm is able to handle the ambiguity and uncertainty of criteria. The extension of TOPSIS algorithm is applied to rank the supplier alternatives. The main purpose of this paper is to enhance the selection potentiality for SMEs that lack of their own engaged suppliers and certainty budgets for choosing the proper raw material suppliers based on multi-period planning horizon. For dynamic economics changing, this method is able to help the prediction of the raw material budget effectively for the next period after getting the optimal supplier for each period. This paper presents a successful application of Fuzzy AHP-TOPSIS to a real raw material supplier selection of SME in Thailand.